How to open a business in Bali? Interview with the head of the visa agency.

If you're planning to open your own business in Bali, this article will provide answers to the most relevant questions. It will help you avoid mistakes that could lead to wasted time and investments.

First and foremost, it's advisable to arrive on the island and actively engage in its life. Many interesting entrepreneurial ideas fall apart after personal encounters with Bali. What works in a larger context might not fit into the local culture.

Bali is different in reality from what social media portrays. One cannot truly convey the island's unique atmosphere, rhythm, and lifestyle through photos or videos. Bali has a distinct ambiance, a different pace, and a unique way of life. Even if you're certain about who you are and what you want in life, your thoughts may quickly change here.

Many entrepreneurs who live on the island and have opened businesses here recount how they began their journey by calmly getting to know Bali, and this approach helped them achieve success. Bali offers an incredible number of opportunities, but to find your niche and understand how to implement your ideas, it's best to see everything happening here with your own eyes.

In this article, we will discuss the types of companies that a foreign citizen can open in Indonesia, how they differ, how they are registered, and other nuances of starting a business in Bali.

This information is provided by Satya Pramana Putra, Director of Legal Indonesia. The company offers services related to visa processing and business registration.

Perseroan Terbatas (PT) is a Limited Liability Company (a legal entity with its capital divided into shares). In Indonesia, there are two types of Perseroan Terbatas: PT PMDN (local company) and PT PMA (foreign company). These two types of companies are typically the ones opened by foreign citizens.

This type of company can be 100% owned by Indonesian citizens only. To open a local PT PMDN company, you need:

IIn other words, this type of company is registered under the names of two Indonesians (the director and the commissioner). The director manages the company, conducts transactions, organizes all the work, and is responsible to the government. The commissioner plays a supervisory role, monitors the director's work, reviews their reports, and approves the annual financial reports. As for you, you act as a business sponsor. However, in reality, you have no legal rights in this company.

in this case, agreements such as loan agreements are usually made, which do not give nominal owners the right to claim the company's profits. Typically, these individuals receive a salary (around $500-700 per month) in addition to a contractual fee for registering the company under their names.

If you encounter internal conflicts or financial difficulties, you can simply terminate the agreement and look for other people to collaborate with. Changing owners in this type of company does not require dissolving the entire company.

You can also be an employee in the company, for example, as the general manager. This allows you to obtain a KITAS (limited stay permit) for work. This type of visa is only issued for a specific company and position, and it does not allow you to work for different organizations or hold multiple positions. Based on this type of company, you cannot obtain an investor KITAS.

Unlike PT PMA, which will be discussed below, there are no restricted business sectors for PT PMDN (such as beauty salons or cafes). Therefore, this option is quite convenient. The crucial step before starting is to conclude internal agreements and contracts within the company, which are individually negotiated in each case and handled by specialists, whose contacts we usually provide to our clients.

This type of company can have two or more foreign legal or natural persons with 100% ownership of the shares and the mandatory involvement of foreign capital.

If two people are opening the company, they can divide the shares between them in almost any percentage: 50/50, 30/70, 10/90, 1/99. (Note that an investor KITAS can be issued to a shareholder of the company with a minimum 1,125,000,000 IDR share = 11.25% of the company's shares). One of them will be the director, and the other will be the commissioner.

For a company with foreign capital, you need:

The requirement for an Indonesian citizen to be a shareholder of PT PMA only arises if the company's sector is not listed in the Negative Investment List (DNI, Daftar Negatif Investasi), which regulates sectors with restricted access.

The list of closed sectors for PT PMA frequently changes, and you can check it on the OSS agency's website.

As of today, the minimum paid-up capital for PT PMA must be at least 10 billion Indonesian Rupiahs (approximately $700,000). The OSS agency, under the Ministry of Investment, controls this process, as well as the licensing of PT PMA business sectors (we'll discuss licensing below).

The injection of paid-up capital after company registration is an internal company matter. The founders can inject the paid-up capital immediately after opening the bank account under the appropriate article or within the company's operational term, thereby investing it.

It should be in the form of funds in the company's bank account directly related to its activities. Categories of expenses that can be considered as investments include:

All financial movements of the company must be confirmed by official documents and presented in the form of reports. Reports must be prepared every three months. If the company fails to report for the last period, it will be calculated until the next period (in three months).

For more detailed information about all the intricacies of working with capital reports, it is advisable to consult with specialists to get all the necessary answers tailored to your specific case.

If you submit all investment reports on time, OSS (Online Single Submission) will have no reason to conduct an inspection. However, even if they do visit you, they will initially request that you rectify any identified shortcomings. The most extreme measure taken for failing to deposit the authorized capital is revocation of the license for the company's primary business activity.

What should you know about activity codes and licenses, and are there any restrictions?

Before opening a company, it's important to determine the primary business activity. In Indonesia, there is a system of activity codes called KBLI (Klasifikasi Baku Lapangan Usaha Indonesia). You choose the primary business activity and several additional ones. Importantly, you can change them during operation, but you should be aware that making any changes to the company's documentation after opening it can be quite costly (starting from 10 million Rupiahs).

It's crucial to understand that the selected business activities should be related to each other rather than from completely different fields. OSS monitors this aspect. If you plan to open a multifunctional company, it's better to create several different firms.

Most business activities in Indonesia require either a license (which can be free or paid, ranging from 5 to 100 million Rupiahs) or special permits. Most permits and licenses can be obtained through the OSS system, but for some, you will need to approach the relevant government agency. For example, activities related to education require approval from the Ministry of Education. Activities related to finance also require special approvals from the Ministry of Finance or the central bank of Indonesia. Without this document, you cannot open a bank account or commence operations. This permission must be obtained within three months after opening the company.

To register a company, you need to provide photos or scans of the founders' passports. You also need to choose a company name, which must consist of three English or Indonesian words. Words cannot have two or fewer letters, and you cannot use punctuation marks or ligatures. Words like "company," "corporation," or "club" are prohibited in the company name.

If the company has a physical location where it will be registered, you need to provide a land certificate, IMB (Izin Mendirikan Bangunan - building construction permit), and a commercial lease agreement

The company must have a legal address. When registering, you must provide your address or rent one. However, there are some limitations. For certain types of activities, a real address is mandatory (such as cafes, children's centers, water tourism, manufacturing, etc.).

For other activities, a virtual address is sufficient (e.g., trading, IT, consulting, tourism services, tour booking, etc.). A virtual address can be used if the entrepreneur provides the address (physical or virtual), and for this, three documents are required:

 If an entrepreneur turns to us, our partners provide all these documents themselves. Virtual offices may also be real spaces for events or meetings, and inspectors often visit these premises. When opening a company's bank account, for example, they must visit to take photos of the building and the premises. All correspondence is sent to the address specified in the company's articles of association. There can be one primary address and several additional ones.

It's important to know one more nuance. The OSS system divides areas where specific activities can be conducted. For example, in Seminyak, there are many restrictions on business activities, while in Denpasar, there are hardly any restrictions.

During registration, when you provide the address, there is an automatic system. If the district you specify is already loaded into this system, there is automatic verification of the type of activity and the address. If the data do not match, you will be denied a business license (NIB), and as a result, the company cannot conduct its activities. However, there are districts not yet loaded into this system, like Denpasar. This is why we chose partners there.

There are also tourist or industrial areas. If you plan to engage in any production (e.g., clothing or cosmetics), your premises must be located in the appropriate zone.

All of these details are discussed during consultations with our clients on an individual basis, as each case has its own peculiarities.

The company registration process culminates in obtaining the NIB (business license), and currently, this can take up to 2-3 months. The duration depends on the number of business activities and whether they are approved or not. Obtaining the NIB is taking quite a long time now, and in many cases, business licenses are being denied.

Before the legislative changes in September 2022, it was possible to open a company in 2-3 weeks regardless of the number of business activities. Currently, it's possible to register a company within this timeframe only if the company has no more than two types of business activities.

Legal Indonesia's services for company registration cost 20 million Rupiahs. This cost includes a registration period of 2-3 weeks and two types of business activities. In other words, if two types of business activities are being registered, the company will be processed within 2-3 weeks. If you require more types of business activities, the cost and processing times are calculated on an individual basis.

Indonesia has two tax systems

It's important to note one nuance. Often, company founders use the corporate account to pay for personal expenses, even for items like the director's villa, etc. We recommend that clients avoid such actions and use company funds solely for business development because such payments can attract unwanted attention from tax authorities.

There are four types of reports for a company

In our company, we have tax specialists and accountants who take care of organizing this entire process.

Repatriating money from an Indonesian company can be quite challenging, as it is from any legal entity in any jurisdiction. Therefore, profits can be repatriated officially only through dividends at the end of the financial year. In other words, a portion of the profit can be repatriated as dividends, subject to a 10% tax (if the shareholder has a personal tax number) or 20% tax (if there is no personal tax number).

There is a less official method, which involves withdrawing funds through the salaries of the director and commissioner. However, in this case, there is a progressive tax on salaries, and for those planning to withdraw large sums from the company, this method is often not suitable. For example, if you withdraw up to 500 million Rupiahs, a 25% tax is levied, making this option less favorable.

When hiring employees, there is a specific ratio of local residents to foreign nationals that must be maintained. An acceptable proportion is one foreign national for every five Indonesians. In such cases, a foreign national is granted a work permit called a KITAS. First, a labor contract is drafted, and then the foreign national obtains a work permit, and only after that, they can apply for a KITAS visa.

In Legal Indonesia, the cost of such a work KITAS is 15 million Rupiahs, but the amount may vary depending on the package of documents provided.

There is a fixed mandatory tax for foreign employees, amounting to $1,200 per year. This tax is paid upon obtaining the work permit (IMTA), and based on this document, a work KITAS can be issued. Additionally, there is a salary tax, which is progressive, ranging from 5% to 30%. The higher the salary, the higher the tax. Often, difficulties arise because certain positions may be unavailable. For example, it is impossible for a foreign national to be employed as a nail technician in a beauty salon. In such cases, they take up a related position (a beauty specialist, which only involves hairstyling, for instance). The list of positions that can be filled by foreign employees is periodically updated. Therefore, before applying for a work KITAS, it is necessary to check if the desired position is available or not.

We strongly recommend against obtaining a KITAS without a genuine company. Agencies that provide such services expose their clients to incredible risks.

The principle is fairly simple. A company is registered with a fictitious director, and all kinds of people are added as shareholders. Initially, everything may seem fine, but after about six months or a year, real problems begin. These problems can range from hefty fines to deportation with no right of re-entry to Indonesia.

The key point is that KITAS is strictly a purpose-specific visa. Obtaining a KITAS for leisure or residence purposes is quite risky. Yes, obtaining an investor's KITAS is easier and faster, but it still comes with serious obligations (investing foreign capital, running a business, etc.). As we mentioned earlier, the OSS agency closely monitors these matters, involving the immigration office, and the consequences can be quite unpleasant.

Opening and successfully running a business in Indonesia is not easy. Even during the document registration stage, it's easy to get lost in the sea of information and unfamiliar abbreviations. However, nothing is impossible. Hundreds of successful businesses have been opened by foreigners in Bali, including beauty salons, wedding agencies, and even laundromats. The key to successful business registration is to entrust your venture to the right and reliable hands. Step by step, under the guidance of professionals, you can work towards success.